Pre Pack Pool and SIP 16
The Pre-Pack Pool is a body of independent advisors who review any proposed pre-pack business sales to connected parties and provide one of the following three opinions on the proposed pre-pack after doing so:
- The case for a pre-pack is not unreasonable but there are minor limitations in the evidence provided
- The case for pre-pack hasn’t been made
- The proposed pre-pack is not unreasonable
The IP must disclose a whole host of information to creditors regarding any pre-pack sale in accordance with SIP 16 (best practice guidance).
The IP must also bring the Pre-Pack Pool to the attention of the connected party.
Initially suppliers (the creditors) who are owed money can be quite upset when they find out about the pre-pack after it has happened.
I can see why – quite often the same directors are just running the same business.
A pre-pack needs to be very carefully considered and justified before it can be used and found that there is no better alternative.
As a result of public pressure surrounding pre-pack administrations, in 2013 Vince Cable (The then Secretary of State for Business) commissioned Teresa Graham OBE to carry out an independent review of pre-packs.
Her report became available in June 2014 and as a result of her findings she recommended a Pre-Pack Pool be put in place to increase transparency of the pre-pack process in cases involving connected parties and provide assurance for creditors that independent experts have reviewed the proposed transaction.
In October 2015 the Pre-Pack Pool went live and began accepting case review applications.
The Pre-Pack Pool is “An independent body of experience business people who will offer an opinion of the purchase of a business and/or its assets by connected parties to a company where a pre-packaged sale is proposed.”
How does the Pre-Pack Pool work?
The connected party will make an application to the pool via a secure, online portal.
After reviewing the application, based on the information submitted, the independent Pre-Pack Pool reviewer will issue one of three opinions:
Nothing was found to suggest that the grounds for the proposed pre-packaged sale are unreasonable
This means the Pool member has been provided with sufficient information and nothing within the information suggests the proposed pre-packaged sale to the connected party is unreasonable.
Evidence provided has been limited in some areas, but otherwise nothing has been found to suggest that the grounds for the proposed pre-packaged sale are unreasonable
This means the Pool member has been provided with information and there is nothing within that information to suggest the proposed pre-packaged sale is unreasonable. However some elements of the evidence presented or arguments made by the connected party (mostly likely to be considered by the Pool member as not being of major significance) were limited and not sufficiently made out.
There is a lack of evidence to support a statement that the grounds for the proposed pre-packaged sale are reasonable
This means the Pool member was not persuaded the grounds for proceeding through a pre-pack transaction were sufficiently made out, on the basis of the evidence presented or arguments made by the connected party.
How much does a Pre-Pack Pool Review Cost?
The current application fee is £800.00 plus VAT.
Is it compulsory?
No, the review is not currently compulsory.
What are the IPs responsibilities in connection with the Pre-Pack Pool and creditors?
The IP has a duty to make the connected party aware of their ability to approach the Pre-Pack Pool.
The IP has a duty to report the circumstances and details of any sale to creditors in their initial proposals and extra detail is required if that sale is to connected parties, such as another/new business that the existing directors are involved with.